Reply to What I don't get: When people complain that they are drowning because their house is underwater

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Reply to "What I don't get: When people complain that they are drowning because their house is underwater"

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[quote=Anonymous][quote]No, the point of a short sale is that the bank agrees to accept less than the amount of the mortgage note for the sale of the property. So they've accepted the loss. At that point, you are only responsible for capital gains taxes on the difference between the sale price of the home and the balance of the mortgage at the time of sale. The amount that the bank forgives is considered profit for you.[/quote]

This is accurate, but make sure to get an explicit agreement, in writing, from the bank that your obligation has been satisfied.  It's not a problem so much now, but early on in the financial crisis, there were instances of banks agreeing to a short sale in recourse states without an explicit agreement of satisfaction, and then going after the former homeowner for the difference.  (And that, buy the way, is, or should be, fraud.)

But to all you people who are underwater, but can make (and are current on) your payments, why should the bank allow you to short-sell?  Take any morality, righteous indignation, or ideas about the proper allocatin of risk out of it - what incentive do they have to let you short sell?  None.  [/quote]

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